Why Union Bank of India Share Price is Rising

If there was one promise that 2024 held for the optimists, it was the promise of PSU bank stocks ruling the market returns throughout the year.

The story was formed by optimism surrounding strong credit growth, in order to fully capitalize on the infra boom.

We're almost four months into 2024 and banking stocks have not disappointed.

PSU Bank Stocks in 2024

Company	Current Price (Rs)	Gains in 2024
Indian Overseas Bank	63.58	46%
Bank Of Maharashtra	64.39	41%
Punjab & Sind Bank	60.93	39%
UCO Bank	55.31	38%
Punjab National Bank	133.1	36%
Canara Bank	599.9	35%
Central Bank Of India	64.59	28%
Bank Of India	141.25	25%
Union Bank Of India	150.5	25%
Indian Bank	520.65	23%
State Bank Of India	765.85	19%
Bank Of Baroda	261.2	12%

Data Source: Ace Equity

Among this lot, Union Bank of India share price has shot up over 25% in 2024 with 7% gains coming in yesterday's session.

Let's find out why this banking stock is rising and what lies ahead.

Favourable Credit Environment

The current optimism in Union Bank shares comes on the back of favorable credit environment.

You see, in the last two years, credit growth has picked up more pace and has bolstered the asset quality of PSU banks.

Union Bank's asset quality is among the lowest in the industry.

Market experts are of the view that smaller banks like Union Bank have a better risk-reward profile due to higher earnings growth potential.

The street is dividend whether the state-run PSUs are lagging in their earnings recovery cycle or whether everything's priced in.

Union Bank is placed in a good spot as its board recently approved a Rs 30 billion (bn) share sale proposal via QIP to fund its business growth.

Government Warns Union Bank of India Account Holders

It really caught me by surprise when I strolled through social media platforms and found Union Bank of India account holders ranting about a fake app that siphons funds by promising rewards.

The government yesterday cautioned smartphone users against this fake app of Union Bank.

These things keep happening with PSU banks often as they're not equipped with the latest superior tech.

Last year, the government had cautioned State Bank of India (SBI) account holders about a fake SMS scam.

Nevertheless, Union Bank is also focusing on digital capabilities to improve its infrastructure.

What Next?

Between 2091-2023, the state-run lender's advances have grown at a CAGR of 21.3%.

In addition to expanding advances, the bank asst quality has also improved.

The NPAs of the bank have fallen dramatically, from 3.8% in the financial year 2018 to 1.7% in 2023.

The lender has transformed its business, converting losses into profits. It generated profit between 2021-2023 after three consecutive years of losses.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Total Income	393,554	432,685	836,182	817,541	970,785
Growth (%)	2%	10%	93%	-2%	19%
Net Profit	-29,334	-30,408	28,280	52,085	84,303
Net Margin (%)	-7%	-7%	3%	6%	9%
ROE (%)	-12.4	-11.0	6.3	8.3	12.2
ROA (%)	-0.6	-0.6	0.4	0.5	0.7
Dividend (Rs)	0.0	0.0	0.0	1.9	3.0
Cost Income Ratio	50.8	47.0	50.0	47.4	47.9

Data Source: Ace Equity

After Union Bank's amalgamation with Corporation Bank and Andhra Bank, the combined entity became the fifth-largest PSU bank in terms of the branch network.

Over the nine months leading up to 2024, the lender's profits surged by a notable 84% on a year-on-year basis. This impressive growth follows a strong showing in the financial year 2023, where net profit grew by 61.9%.

Looking ahead, the bank is optimistic about robust growth in the near future and is well-placed to capitalise on the pickup in the corporate credit cycle.

The demand for loans is expected to remain strong going for banks with the economy expected to grow more than 6.5% over the next few years.

However, the ability of banks like Union Bank of India to manage their NIMs would be key, given that the rate easing cycle is still 6-9 months away.

How Union Bank of India Share Price has Performed Recently

In the past 5 days, Union Bank of India share price is up 4%.

Yesterday, the stock rallied 7% on the back of heavy volumes.

In 2024 so far, the stock is up 25%.

Union Bank of India has a 52-week high of Rs 163 touched on 5 April 2024 and a 52-week low of Rs 68 touched on 26 June 2023.

In the past one year, shares of the PSU lender have gone up by 105%.

Here's a table comparing Union Bank with its peers -

Comparative Analysis

Company	Union Bank	Bank of India	Canara Bank	Indian Bank	PNB
ROE (%)	12.2	7.5	16.4	12.9	3.3
ROCE (%)	12.9	9.4	14.8	11.2	5.8
Latest EPS (Rs)	17.4	14.1	80.8	56.8	6.9
TTM PE (x)	8.7	10.1	7.4	9.2	19.2
TTM Price to book (x)	1.3	1.1	1.3	1.3	1.5
Dividend yield (%)	2.0	1.4	2.0	1.7	0.5
Industry PE	11.6
Industry PB	1.7

Data Source: Ace Equity

About Union Bank of India

Incorporated in 1919 in Mumbai, Union Bank was nationalised in 1969.

Amalgamation of Andhra Bank and Corporation Bank into Union Bank was effective from April 1, 2020. Post amalgamation, the merged entity enjoys the benefits of larger balance sheet and wider geographical reach.

To know more, check out Union Bank's financial factsheet and its latest quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...